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Spirit Airlines (SAVE) Mired in Headwinds: Time to Dump?

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Spirit Airlines (SAVE - Free Report) has lately been hurt by operational disruptions and a spike in coronavirus cases, which are expected to reflect in its third-quarter results.

While air-travel demand continues to be below the pre-pandemic levels despite improving, it suffered a further setback due to a spike in coronavirus cases, induced by the Delta variant. As a result, Spirit Airlines witnessed an uptick in cancellations and softer-than-expected booking trends in the third quarter. The carrier estimates an impact of $80-$100 million on revenues in the third quarter as a result of weakness in bookings. The company expects third-quarter revenues to be between $885 million and $955 million. The mid-point of the guided range — $920 million — is below the Zacks Consensus Estimate of $933.69 million.

Spirit Airlines witnessed significant disruption in its operations over the period between Jul 30 and Aug 9, due to adverse weather conditions and airport staffing shortages. This caused the company to cancel 2,826 flights during the period. As a result, the company estimates a negative impact of approximately $50 million on its revenues. Spirit Airlines had said that it would make “tactical schedule reductions throughout the remainder of the third quarter” as airport staffing shortages continued.

With the carrier already struggling on the bottom-line front, rising fuel costs due to increase in oil prices do not bode well for the company. In the June quarter, average fuel cost per gallon rose to $1.95 from $1.05. Fuel price per gallon is projected to increase further to $2.19 per gallon in third-quarter 2021. Escalating fuel prices have the potential to hurt the airline’s bottom line.

Primarily due to the abovementioned headwinds, shares of Spirit Airlines have declined 30.1% in the past six months.

Zacks Investment ResearchImage Source: Zacks Investment Research


The Zacks Consensus Estimate for Spirit Airlines’ 2021 loss has widened by approximately 60% over the past 60 days.

In light of the abovementioned negatives, we believe investors should steer clear of the Spirit Airlines stock for now, as is suggested by its Zacks Rank #4 (Sell).

Key Picks

Some better-ranked stocks in the broader Transportation sector are Copa Holdings (CPA - Free Report) , ArcBest Corporation (ARCB - Free Report) and Herc Holdings (HRI - Free Report) . While ArcBest and Herc Holdings sport a Zacks Rank #1 (Strong Buy), Copa Holdings carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Copa Holdings, ArcBest and Herc Holdings have rallied more than 66%, 100% and 200% in a year’s time, respectively.